Major depressive disorder in entrepreneurship: implications for outcomes

Purpose This study aims to explain how severe major depressive disorder among entrepreneurs becomes consequential beyond the focal individual and affects the wider organization. Specifically, it examines how entrepreneurs adapt their work through coping strategies, how employees interpret and respond to resulting changes in leadership presence and predictability, and how these responses are associated with coordination, knowledge continuity and firm performance. The paper further explores how these organizational dynamics interact with entrepreneurs' performance thresholds, coping requirements and available alternatives to shape entrepreneurial persistence and exit. Design/methodology/approach The study adopts an inductive, multiple-case research design based on five founder-led firms involving entrepreneurs diagnosed with severe major depressive disorder. Cases were selected through theoretical and polar sampling to compare persistence and exit outcomes. The empirical material comprises 32 semi-structured interviews with entrepreneurs, employees and medical professionals, supplemented by archival materials and company documents. Data were analyzed iteratively through open coding, within-case analysis, cross-case comparison, and repeated development and refinement of theoretical categories and propositions. Findings The findings indicate that entrepreneurs with severe major depressive disorder adopt work-related coping strategies, including reduced working hours, withdrawal from operational activities, and delegation. Employees may interpret these changes as reduced leadership presence and predictability and respond with uncertainty, disengagement, conflict or resignation. These reactions are associated with coordination problems, disruptions in knowledge continuity and declining firm performance. Persistence and exit further depend on the interaction between current firm performance, entrepreneurs' reassessed performance thresholds, coping requirements, and the availability of health-compatible income or occupational alternatives. Research limitations/implications The study's qualitative, retrospective multiple-case design limits generalizability and does not permit causal conclusions. The findings rely partly on perceptual accounts and were not supported by systematically comparable objective performance data. Moreover, the focus on five small, founder-led firms involving entrepreneurs with severe major depressive disorder restricts transferability to other settings. Nevertheless, the study highlights the need to support both entrepreneurial recovery and organizational continuity through clear communication, delegated decision rights, knowledge documentation, backup leadership and access to health-compatible persistence or exit options. Practical implications The findings suggest that supporting entrepreneurs with severe major depressive disorder should combine health protection with organizational continuity. Entrepreneurs, employees, managers and advisors should clarify responsibilities, decision rights, communication procedures and backup leadership during periods of reduced involvement. Firms should also document critical knowledge, cross-train employees and reduce dependence on individual knowledge holders. Support organizations, healthcare professionals, and policymakers should help entrepreneurs evaluate health-compatible options, including temporary management support, flexible employment, succession, disability-related benefits and orderly exit, rather than assuming that continued entrepreneurship is always preferable. Originality/value This study offers an original relational and multi-level perspective on entrepreneurial mental health by examining how entrepreneurs' severe major depressive disorder becomes consequential for employees and organizational outcomes. It identifies work-related coping strategies, employee interpretations and responses and knowledge embeddedness as interconnected mechanisms linking entrepreneurs' mental health to venture functioning. The study further extends threshold theory by showing how mental health may shape both firm performance and entrepreneurs' continuation thresholds. It thereby moves beyond predominantly individual-level explanations of entrepreneurial mental health, persistence and exit.